Congress Passes Emergency Pension Tax Relief/Technical Corrections
The continuing drumbeat of bad economic news has spurred the lame-duck Congress to pass an emergency package of pension recovery provisions and pension-related technical corrections. The Worker, Retiree, and Employer Recovery Act of 2008 (H.R. 7327), approved by Congress on December 11, suspends required minimum distributions (RMDs) from 401(k) plans, IRAs and similar retirement accounts for 2009, provides pension plan funding relief, and includes long-awaited technical corrections to the Pension Protection Act of 2006 (PPA) (P.L. 109-280). President Bush is expected to sign the Worker, Retiree, and Employer Recovery Act as soon as it reaches his desk.
This year-end round of tax legislation foreshadows much more tax legislation, first in the form of a large stimulus bill, expected to be unveiled by the 111th Congress before President-elect Barack Obama takes office. Pension benefits experts also forecast that the Worker, Retiree, and Employer Recovery Act represents only the first step in shoring up retirement plans, with further relief likely in 2009.
Impact. The pension package was pushed through Congress before year-end largely in response to two immediate concerns:
(1) the inability of many pension plans to meet new funding obligations that would lead to frozen plans and business cutbacks and (2) the hardship placed on many retirees if they were forced to take RMDs when their retirement savings are at their lowest point in years.
Impact. Two powerful business tax breaks were removed from the final version of the new law: extensions of 50-percent business depreciation and increased Code Sec. 179 expensing. Although both incentives are on track to terminate at the end of 2008, chances remain very good that these tax incentives will be extended into 2009, retroactively in the stimulus bill set for passage in January under the new Obama Administration.
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